>> business news from the capital region. this is "washington business repoport." >> thank you for joining us. investors jumped at the news that republicans might be willing t to go along with poststponing a fight over spending. the debt ceilingnd the postpone fiscal cliff are fast approaching. the possibility of a government shututdown -- we looked at what

the legislate season meansns for new priorities in marylaland and virginia. we have three spspeciaguests. joining us today, , annie lowrey, bruce depuyt, and peter morici. wewelcome to youou all. bruc want to start with yoyou. you headed to annapolis. all the othther reporters waited in line as you i introduced -- interviewed vernor o'maey. we want t to hear a little bit about that ininterview. things that he had to say about the economy. what was your overall take o the interview with governor o'o'malley?

>> he is trying to have it both ways. hehe is trying to raise his national profile in a number of ways, but he i is also tryiying to do it in n a way that makes it clear that his main focus is governing the state of maryland. >> e economics back a sarah palin? -- you do not expect a sarah palin? >> he is going t to remn chief execute of the state of maryland for the remainder o of his s term there is relief that the worst of the pain and the state of maryland seems to be over. he can pivot past that. he can focus on the death penalty aeal. -- death penalty appeal. he can focus on wind power.

>> l's turnrn to your talk with governor o'malley how to pay for it. his preference is for an increase in the sales tax. >> iyou went to a community meeting and asked 30 people, if you had to choose between raising 700 milon by increasing the gas tax by 18 cents, or by increasing the sales tax by a penny, most people would say -- they did not want to do either, but if they had to do one, the sales tax is a less painful and more palatable way to go about th. >>is reasoning behind that, he sasays because -- a good way for the environment less reliance on gas. the gasoline tax is not revenue -- generating revenue at once dead. >> i was surprised.

he and his counterparts have sparred over time on a number of issu. he gave gov. mcdonald credit r recognizing that the gas tax is generating less and less overtime becse of greater fuel effificiency, hybrid vehicles. you have to find a new source. for the governor, that means this p push, and we will s see if f it becomes part of his legislave package this year. adding a penny to the sales tax. >> peter morici, you think th is aousy idea and you are not alone. the wall street editoal pag blasting gov. bob mcdonnell. they say is a bad idea because it let drivers off the hooook. it taxes people for something they may not be using. >> we want to tax folks for

using theoads directly. the gas tax is the best way to do that. u double the gas tax youou have not doubled the burden.. as long as people use gasoline, it makes senense. a portion, we w will raise the sales tax and only use a portion for transportation. soer or later, we will have to find a a substitute for the gas tax. that is a long time off. ifif you look at what is happeng in detit, we are focuseded on a fuel-efficient engines not getting g rid of them completely. >> both governors feel like th have gotten pasthe worst of their recession. the budgdgets e looking better in both states. you did a pie in the new york mes m magazine that foced on the distririct.

your argument that it was at the expense of taxpayers nationwide, make your cacase. >> looking at the d.c. regional economy, which has become the richest in the entirire country all of the reason that it happened was that federall spending increased e especially in the metro area. d.c. -- i really mean the whole region including maryland and virginia, got a little bit t of a buffer by the federal spending.g. even though you saw unemployment go up in t district, there hundreds of biions of dollars the federal government. we d did abobout $15 of every -- cents of every procument dollar.. there has been such growth and securirity conontacting, that has led to the region attracting more businesses. >> she i quoting dr. stephen

fuller from george mason. that is a huge amount coming to the washington area a for every federaral dollar spent. there is a flip side to that. we are seeing a possle downside. didd you notice any concern from the governor o'malley about the fact that federal spending may be decreasing? >> the is no question that the size of the federal governmenent makes us as close as you can n be to being recession-proof. we are buffeted, we are protected in tererms of this regigion whehen the economy goes south. there is some concern that whetr it is the sequeststered that we will see a cut in feral spending this year and ththat will disproportitionately affect t washington area becacause we benefits in general. there are down sides. one is traffic and the other is

housing. two hououses in my neighborhooood have gone for it -- sold immediately and it went f for w above the asking. one of them had 19 offers. you almos wonr, is s it back to the previous --re recession days?? > gernor o'malley is n sendining an i increasing amount in the maryland rainy day fund. he is concerned they will not meet their deadline and will be automatic sequestrion. > it is impornt to lk past seestration and the e drama of a share. we had a big surge in government spending. and then because of what happened during the financial crisis. lookin forward we will be capping a discretionary spending. washington folks live of diretionary ending. over the next sevel years there will not b be a lot of

growth and the federal bureaucracy. >> this a amount ofederal contracts in dollars it metastasized in the bush administration because of the wawar on terror. peter, there has been a huguge -- >> we havead our search, and now we're going tstabilize. -- surge, and now wewe are g going toto stabilize most of the growth is going to be entntitlements and that does not t feel washington. >> the washington business journal -- you are n not giving the c. area and of credit for its talent, in elevators that go beyond the federal government. we d do have gros likeke living social headquarters of fortune 500 companies that have nothing to do with the federal

government. on the other hand, talent and innovation are not to words s that people use when talki about the strict. what are your thoughts? >> the economistst thai talked to a about the regegional economy descriribed concentric circles. you have federeral dollars, a lot of which is going to cocontractctors. that rages -- raises wages but they need to hire computer programmers. that level of human capital rises. that draws and othther bususinesses. i think ththat it is true that it isis not just the federal government. we have seen a lot of tech companies and multinationall companies. what happe when therowth in feral spending slows down? can the d.c. economy stand on its own 2 fe? >> we only he 30 seconds. >> the private sector r is dominick, the district will be

hurt by a ock lilining the federal dollars. -- flatlining the federal dollars. >> i wanto talk about tax credits. our number of the week, we will quantify how many washingn businesses are considered the best places to work. stay with us.

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based in the w washington region including in the list of the 100 best companies to work for. navy federal credit union topped the list in 56 place. marriott international at 81. a big part of the rating is a survey completed by random sasampling of the emploloyees from each company. google tops the list for 2013. we will be right back. look, every day we're using more and more energy. the world needs more energy. where's it going to come from? ♪ ♪ that's why right here in australia, chevron is building one of the biggest natural gas projects in the world. enough power for a city the size of singapore for 50 years. what's t going to do to the planet? natural gas is the cleanest conventional fuel there is. we've

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>> welcome back. we continue ourur round table this week w with peter morici, ane lowreyand bruce depuyt. bruce, we started the show with a clip of your interview with gov. martin o'malley. let's go back to that interview. the governor talked about what he wants to do in terms of helping create jobthrough state spendining. >> as people out there many still looking for work, we will have robust capitital investments in terms of school construction wastewater infrastructure, and a fair amount in transportaon. we have emerging stors that have thus rank as the nber 1 state fofor innovationn. we'll be harnessing those things, too. >> the governor wantining to spend on school construion,

that will create jobs. one ththing the business community is payinclose atteion to or what kind of tax credits mamaryland will offer in the new year. they have offered tax credits i in thee past for research and developmt. what does the governor planning on doing in terms of tax edits? >> this will get fleshed outut during the course of the ssion. some of the things, film credits, production of television and film and vaous things. all these things become controversial. each one has to be fought individually. the governor is going to harness his political capital. the state'sinances -- he is in a tent -- position to move forward where chooses to. he has a democratic assembly

unlike other places. wewe will see what he c chooses to focus on. >> both governors are beingng closelely watched for what they do in theheir states. a lot of -- conservatives criticize o'maey for weathering t recession thrhrough tataxes and not cuts spending. gov. b bob mcdonnell to a different approach in v virginia. what is ur take on both men? >> b both of them have a future. in dferent places because they are in different places. mr. o'malley looks a lot like other liberal govnorsround the country.y. he will l have a lot of trououble differentiating himsmself. just a lot of governors taking his approa. i do not know ththat he will have the place on the national stage if he does not come up with somome great idea but catcheses people's imagagination. > the goverr has said that he is very ccerned that congss is going to sidestep its own

deadline responsibilities, a and not get a deal in time tovoid sequestration. there was talk this we, at the possible offer from reblics on the debt ceiling. we are facg two different dedeadlines. republicans are sayining, we might give an extension until april 15. if youo not do it, no memberer of congrs will get paid starting april 15. what is your takake? >> i certaininly think that both governrnors would love the idea of congress not getting paid until it does what it needs to do. they have all of these deadlines. sesequestration, which they only push back two nths. theyey have a continuingng resolution to fund the government. it is comi in a matter of weeks. and there is theebt ceiling. it could be financially

damaging. >> we do not know when at iss coming. >> the date keypad, february 15. --ou pegged bruary 15. >> it could be disastrs. you have heard a lot of officials from state and local government reminng congress that t there is a huge spillover effect. right now, they are still negotiating. there's still trapped in negotiating cuts in the long- term deficit. -- they're still trying to negotiate cuts in the long term deficit. >> the republicans have been criticizeded for discussing financing, spending we have already done. that is not really true. the debt we have pays for the money that has already spent. increasing the debt cling thisould tie how much money

we're going to spend. it would takee away a big talking point of the president and force -- how mumuch more debt do we want toto take on? what doeshat mean innerms of the entitlements? itas shifted in terms of the debabate. i do see what they are up to. >> democratats have said, no strings attached. the president said, no negotiations. per has writn about the fact th we are playing w with credit dowowngrade in any way. yohave to tackle the speing cucuts. you talk a lot to business leaders who say, the worstt of all possible worlds is the uncertainty. even t republican n plan to push this back does not get at th heart of w what -- businesses say we just need to know. >> the notion that you would play games with the debt cling

increase or tried to link it with other aspects of the federal l budget discucussion are risky for the gop, , both politically and in terms of not just our economy but the g global economomy. we are coming out of the worst rerecession since the depression. ththis is not the time to be spooking investors, spooking wall street. even some of the gop say this is not one of them. >> without doing anything about spending, we w will be downgradedd any y. >> annie into ubt that we hahave already passed the deadline. ---- pointed outut that we have already passed the deadline. you have written about h how dangerous this ithe wewe are not fuy down but - -- >> t the debt ceiling isis a very teorary issue.

what the bond rating agencies are focused on is that we ve gone to the point where we cannot come up with taxing ructure. we're getting into o the kinds of situations that italy is in. >> where are the specific prosals? >> i will givyou a propol if you want to be ththat way.. t's raise everybody's taxes. if you a goi to p the ququestionons to me, let me resespond but l's say we increase everybody's tataxes by 25%. everybody's taxes, that is it. you sll have an $800 billi deficit. it would likely shrink the ecomy so you're not would b be smaller. we're getting to the point -- we cannot tax ouray out. that is why we wilill be downgraded.. >> that is it for our roundtable. we will be back with some

closing notes after the break.

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